Block-holder ownership, family control and post-listing performance of French IPOs

Purpose - While advantageous, the role of family control is under-explored in finance. Family ownership can help guarantee stability of business and long-term planning. The purpose of this study is to examine whether block-holder ownership differentially affects the long-term performance of initial public offerings (IPOs), and verifies whether this effect differs between family and non-family IPOs. Design/methodology/approach - Using a sample of 163 French IPOs from 1996 to 2000, this paper examines the links between family control and the first-year market performance. It focuses on IPOs where both families and Venture Capitalists (VCs) are engaged to lock-in their shareholdings for a period of one year following the IPO date, and are thus expected, at least in the case of families, to provide an effective monitoring during this period. Findings - The main findings bring support to the entrenchment hypothesis and show a negative, but weak, relationship between block-holder ownership and the first year market performance (p = 10 per cent). Moreover, there is cubic relationship between family ownership and post-listing market performance where the first-year buy-and-hold first decreases, then increases, and finally reverts to decline. Originality/value - While most of prior research focuses on the association between ownership and governance effects on firms' performances in publicly-owned firms, this study demonstrates links between family control and performance in issuing firms operating in France, where family-controlled IPOs are a common model of corporate governance.